Whoever Fights Monsters …

I was one of Narendra Modi’s biggest fans.

I supported his candidature as the prime minister of India years before he became the phenomenon during the 2014 general elections in India. I can honestly claim that to the extent that I could I even worked indirectly for the Modi campaign.

Sadly, I am no longer a supporter. My support was based on the promises that Modi had made about the policy changes he would make if he were to become the PM. Professionally as a development economist — right from the very inception of the discipline of economics my tribe seeks to understand the nature and causes of the wealth of nations — I am interested in India’s economic development. Not just professionally, personally I am moved by the pity I feel for the poor and impoverished of the world and naturally India, my native land. My support for Modi was contingent and instrumental. I believed Modi would do what was needed to transform India into a developed nation. I wrote a damn book on “Transforming India” in 2011.

The fact is that Modi had made many promises, most of which were pleasing to classical liberals like me. We believed those promises because they were consistent with our beliefs and ideologies — limited government, prohibiting the government from running commercial enterprises, non-discrimination, secularism, etc.

By ‘we’ I mean a large number of fellow travelers: committed, sincere, honest people who had no other agenda but to see that there was a real change of direction and substantive change in the relationship between the state and the people. We were promised a break from the past, a disruptive change that would liberate India. We believed that Modi was capable of breaking the chains that the governments of the past — especially those led by the Indian National Congress — had forged for decades, and that he would set India on a path to social peace, economic prosperity and global significance befitting a nation of over a billion people.

“When the facts change, I change my mind. What do you do, sir?”

I was wrong; we all were. We were misled, lied to, betrayed, let down. And that’s the most charitable way of putting it.

Modi the candidate for PM and Modi the PM are two entirely different beings. In numerous election rallies, candidate Modi thundered that “government has no business to be in business” and promised to reduce government interference in the market; as the PM, he did precisely the opposite. Here’s a small example.

Around 1951 you could count the number of central government public sector units (PSUs) on the fingers of one hand: there were five. Twenty-five years later by 1976, that number had ballooned to 155. By 1984, there were 220. The central government added 70 PSUs in the following 30 years — for grand total of 290 by 2014. That’s a rate of increase was a little over two per year.

With Modi as the prime minister — and the de facto autocrat of India — the rate of increase of public sector units shot up to over 12 per year. In the four years 2014 to 2018, about 50 additional PSUs were added. Modi promised one thing — “government has no business to be in business” — and delivered precisely the opposite.

It appears that to PM Modi, every problem has precisely one answer: more government, more bureaucracy, more taxes, more cesses and transfers, and more public spending. Candidate Modi had promised “minimum government, maximum governance.” It was a great line but in retrospect totally bogus. It’s all wag and no dog.

I generally abhor any state discriminating among citizens. I have absolute contempt for governments that discriminate along religious lines, as is routine in Islamic states. It is shameful that the Indian state has codified religious discrimination. Candidate Modi had stressed that he would end discrimination against Hindus, by repealing anti-Hindu legislation like the Right to Education Act, and get the state out of managing temples. It was like music to my ears because the “generality principle” — the idea that legislation should apply equally to all citizens and not be based on group and religious identity — makes it illegitimate for the government to favor one religion over another.

What’s missing is the equivalent of the First Amendment of the US Constitution, which states (in part) that “Congress shall make no law respecting an establishment of religion …” I had hoped that as the PM, Modi will amend the Indian constitution along those lines. Fracturing an already fractured polity along religious lines was not expected.

Modi was given an unprecedented opportunity to make radical — meaning “arising from or going to a root or source;” — but simple changes. He could have undone every policy that has kept India backward and poor. It is not rocket science: just stop doing all the bad stuff. But he continued and even intensified the stupidity and insanity of the past policies. He implemented failed policies more efficiently. The fact that government is generally inefficient is a saving grace because governments usually cause harm. Efficiency in doing what you should not be doing at all is not a matter of pride.

There are two fundamental problems with the Modi government. First is that it does not understand that structural problems cannot be solved by project-based solutions. No matter how expensive a project you implement to feed a dwarf, it will not grow up to be a giant. Farm loan waivers, for example, will not solve the structural issues that plague the agricultural sector. What is needed there are labor law reforms, education sector reforms, and land law reforms.

Why labor law reform? Because it directly impacts the number of non-farm jobs. Why education? Because without a vibrant education sector, farm labor cannot transition into manufacturing and services. Why land law reforms? Because small and marginal farmers cannot move out of agriculture.

The Modi government’s lack of understanding brings us to the second of the two fundamental problems: it lacks talent. It does not have people who understand. It lacks people with domain expertise. All institutions, public and private, depend on wise leadership, people who have spent decades understanding their domain, and have demonstrated ability and commitment. As the prime minister, Modi had the enviable position to command the services of the very best talent from home and abroad. He did not do that. The less said about the competence of people he put in charge of various institutions, the better. It remains a mystery why. Perhaps politicians aren’t wise enough to appreciate the importance of wisdom.

No sane economist would have ever recommended demonetization. But Modi was ill-advised and undertook the biggest assault on property undertaken by any democratic government. The ostensible goal was to eliminate black money. But demonetisation did not stop black money because it isn’t the fiat money that is at fault but rather the structure of the economy that generates the black money.

The goods and services tax (GST) is only a moderately bad idea. What makes it terrible is the level and variety of the taxes. It’s motivated by greed — get as much revenue as can be squeezed out of the people. Demonetization severely hurt the unorganized sector and the small enterprises. GST dealt a blow to the other parts of the economy. The loan waivers and increased public spending has damaged the entire economy. Basically, the Modi government machinery, like a giant vacuum cleaner, sucked up all the liquidity and left the economy dry of all vitality.

Nehru set India on the path to socialism, which inevitably leads to poverty and destitution. India has the world’s largest number of people in extreme poverty. Nehru’s daughter Indira sped up the journey along that socialist path through nationalization of various enterprises and banks. Father and daugher set India on the road to serfdom.

Perhaps at some time in the past Modi may have vaguely understood that they were the monsters that devoured hundreds of millions of innocent people. He may have vowed to destroy the legacy of those monsters, as it would seem from his election slogan of “Congress mukt Bharat.” But when the time came, he continued the same failed policies of the past. Indira’s emergency found its analog in Modi’s note-bandi. He became the people he apparently despised. Like them, he imposed more government, more discrimination, more meddling in the economy, reduced freedom.

That old curmudgeon Friedrich Nietzsche — one of the greatest philosophers of the Western tradition, the man who contemplated a world beyond the distinction of good and evil, the one who examined the morality of Christianity and found it wanting — had warned that the danger in fighting monsters lay in becoming one yourself.

“Whoever fights monsters should see to it that in the process he does not become a monster. And if you gaze long enough into an abyss, the abyss will gaze back into you.”

Perhaps Modi gazed into the abyss a bit too long. And that’s why India is staring at the abyss of insignificance and irrelevance.

I don’t think Modi wants to expand states’ role in the economy. He is only interested in India’s development. But Nehru’s model of economic development having ruled India for 7 decades, it’ll take time to reduce states’ role bit by bit. However, Modi has disappointed many of his admirers by not taking any initiative on reforms in education sector and not undoing the damage done by Sonia G in the land acquisition process.

Show me one politician or general do-gooder who is not “only interested” in development and I will eat my hat (which I will have to buy because I don’t own one.)

Even if Modi were sincere about development, but if he doesn’t know how or what to do about the matter, it would not help. Sincerity is not enough. Meaning well is not enough. “Let me save you from drowning,” said the monkey to the fish and put it up on a tree. If good intentions were sufficient for good outcomes, we’d have a paradise on earth. As Aaron Wildavsky noted, “It is up to the wise to undo the damage done by the merely good.”

But the situation is worse than merely the lack of understanding. Politicians are motivated by their prime directive: to stay in power by winning elections.

Ludwig von Mises wrote, “No politician is … interested in the question whether a measure is fit to produce the ends aimed at. What alone counts for him is whether the majority of the voters favor or reject it.”

Modi says that he’s interested in development (like all politicians, as noted earlier). If he had to choose between (A) a policy that will be great for development but would be very, very unpopular, and (B) a policy that will hurt the economy massively but will get immense popular support, what do you think he will choose? I bet you dollars to donuts, that he will choose policy B.

And that’s what Modi’s been doing. He’s choosing bad policies that will keep him in power. That’s the same thing that the Congress did before him. That’s why I put the Congress and Modi in the same set of unworthy people.

If by your comment you imply that I was slow on the uptake, I beg to differ. I supported Modi because of the promises he made; I withdrew my support when I realized (very early on in June 2014) that he was not going to keep them. I made that point by quoting “When the facts change, I change my mind.” By all metrics, I was not late in my change of position.

Modi needs more depth for actual change…. and also does not have coterie of capable and whomsoever can, are excluded or being excluded slowly for persistent fear for his own safety. Now matter arises – is he power hungry?? Think more characteristically and answers will be with you in a short while.. take his jibs into consideration in parliament or outside.

From a Prime Minister, we need firm and time bound deliverable goals on following:
1.EDUCATION – GOAL FOR PRIMARY EDUCATION FOR ALL, THEN SECONDARY EDUCATION FOR ALL AND FINALLY SCHOLARSHIP BASED COURSES – NO RESERVATION IN EDUCATION
2.BIOTECHNOLOGY (FOOD, MEDICINE PRIMARILY)
3.80% NUCLEAR POWER USE IN INDIA
4.SPACE EXPLORATION – OUR OWN HUB IN SPACE
5. CONNECTIVITY THRU LAND AND RIVERS

IF THERE IS SOME RADICAL CHANGE IN ANY OF ABOVE EXCEPT GOING ON, ON THE SAME PACE AS EARLIER, PLEASE MENTION. IN BIOTECHNOLOGY – WE HAVE NOT YET EVEN STARTED AT UNIVERSITY LEVEL IN PROPER WAY…

I think, Atanu doesn’t understand the difference between knowledge and wisdom. An individual may be very very knowledgeable like Atanu but wisdom comes from actually trying to do things, failing sometimes and succeeding sometimes. And for any politician, power is an instrument for doing what he wants, be s/he a socialist like Indira Gandhi or a capitalist like Rajaji. In a democracy like India big bang reforms are possible only when the situation is desperate like it was in 1991 (PV Narasimha Rao). Things in India are best done slowly & gradually so as not to rock the boat, so-to-say. Even before 1991, things had started happening slowly on the economic front (during Rajiv Gandhi years) but Rajiv had to go due to Bofors scandal.

Out of n number of possibilities of making a positive change, why only see things that could not be done, and why not give it to modi where it’s due!

What would you say about his work on Jan dhan, DBT, toilets, infrastructure development, houses for poor, air travel, keeping financial stability, electrification, medical coverage for poor etc.?? It’s always easy to do commentary sitting on the fence! And do enlighten readers who is the lucky one enjoying your support now?

I oppose all public schemes like Jan Dhan, toilets, houses for the poor, air travel, medical coverage for the poor, etc. It’s not the government’s job. They are all societal responsibilities. Conflating society with government is not at all helpful.

This is the problem with academics. Everything is a theory for them. When someone deviates a little from their prescribed theoretical approach it does not suit well with them.

Dr Atanu Dey being a well meaning and brilliant academic, proposed an economic solution which is more of a free market approach – which of course is the right approach – but implementing that in India is not easy.

Just keep in mind, India is a county where governments after governments do “loan waiver” and no one raises the specter of moral hazard. The society is so deeply ingrained with the poison of leftist communist thinking that people (educated ones) have not even heard about absolute basic principles of economics and fundamentals on which a market based economy is supposed to run.
In the darkness of economic ignorance one cannot come in with Milton Friedman style approach.

Modi believes in market principles but he also believes that for him to implement any pro market reforms he must first secure a second term. In the history of this unfortunate nation no non congress government has had that fortune.
Armchair quarterbacking is easy and fun

Hi Atanu, I read your piece with interest. What a late awakening you have had. You put in your lot with a demagogue. Being a student of economics shouldn’t stop you from being a student of history. “When people show you who they are, believe them the first time”, as Maya Angelou once said. Modi the CM had shown us all we needed to know. To buy into his economic liberalisation policy promises while knowing that his politics, at heart, were never socially ‘progressive’, led to his promises being dead on arrival. To think otherwise is simply naive. We have paid a heavy price for the sheep-like behaviour of many an educated citizen of this country.

Anisha, “late realization”? I realized that he was not going to deliver in June of 2014. The fact is that I have been writing against the Modi government pretty much the entire time that he’s been the PM.

Atanu, then you contradict yourself, because in your blog post, you write: “I supported his candidature as the prime minister of India years before he became the phenomenon during the 2014 general elections in India. I can honestly claim that to the extent that I could I even worked indirectly for the Modi campaign.” In that capacity, you helped getting him elected. If the realization of Modi’s non-delivery hit you in June of 2014, then you seem to have based a lot of your assumptions on wishful thinking.

I will say this: It takes courage to challenge the current dispensation, as we know — criticism has quickly and disingenuously been attacked as “anti-national” by Modi’s devotees. It is helpful and necessary to point out blatant policy failures and cite statistics as you have done. I think that ardent supporters of the PM are more likely to take on board the criticism by former supporters like yourself. In that sense, thank you for your service to the nation!

I have many mixed feelings about Modi too – but the truth is that we all projected our version of Modi onto him. I am not making him out to be a superhero or whatever, but we have the luxury of an ideological purity that he doesn’t. He needs to win an election in order to wield power. Multiple times. We can only speculate about the powers that are arrayed against him. Whether it be internal sabotage, or political alignments within the Judiciary and the Bureaucracy – most of which are organised against him.

PERHAPS he wanted to be more free market, but was held hostage. PERHAPS.
GST was a maze because the only way they would agree to execute it is if states still received the same revenue post-GST. PERHAPS Smriti Irani would have gone through the education act with a hatchet but was traded out in order to get GST passed. We will never know the real reasons.

Demonetisation for me, was a symbolic move. It was an exercise in Change management. The psychological hit – that the government can rescind your cash at any moment, was probably more important than its actual effect. And the effect on the “general public” about how this guy is “ballsy” and made a move that could lose him an election.

Don’t get me wrong – I am not trying to justify a lot of trash that has passed for policy and governance in these past 5 years. However – there is an election approaching and as an Indian citizen I have an obligation to vote. I would much rather my vote went to Modi than anyone else. Because despite everything – I believe we can actually get him to listen (or fool his government into reforming).

I’ve tried a lot – I even joined up with Sanjeev Sablok’s party – which, frankly is a sham. Theyre unable to come up with anything new and behave much like the AAP.

So where does that leave us? I do not believe in NOTA and never have. So either we start ANOTHER political party – or push the one that is ideologically closest.

I believe you are despairing a tad too much when it comes to Modi. The numbers of the economy still tell a good tale, and I don’t doubt their credibility. So it’s not over yet.

There is however one problem – Modi is not going to win this election – because of the number of people like you who are discouraged and on the fence.

The opposition is united – and it doesn’t have to convince anyone of anything. Their strategy is simple – Ensure the BJP gets 271 seats. That’s it. It’s not complicated. Therefore they will win. Unless there is sufficient on the ground support for Modi. And for that to happen – perhaps all of his populist moves will work.

You have wield power in order to use it. And Modi doesn’t want to make Vajpayee’s mistakes. Vajpayee’s government of course, was the only true free market-supporting government we ever had. Reduced tarriffs, lower taxes and honest to goodness privatisation. But those structural changes took longer than one election cycle to bear fruit, and Vajpayee, like Modi, did not have the benefit of Social Media to change the narrative. So we all lost 10 years of our lives.

Basically your point is that Modi was forced to put the corrupt and/or incompetent people as ministers. That I find hard to believe. He was in charge right from the beginning. He chose his ministers. And they were the worst, starting with AJ. What a disaster. Manmohan Singh, the despicable dishonest Italian puppet, looks good in comparison.

Interesting way to think about the matter and reconcile the disappointment with the hope for a better country/ Govt.
Well-written points, Phoenix.
The truth is that no matter what Modi or any other Indian politician says, the culture for decades has been one of left of centre and the most economically liberal mainstream politician is ultimately a socialist ass at heart. It probably reflects the will of the majority. Leadership is endogenous.
The options for us then are to either support the (much) lesser of the two evils or choose the more evil one to precipitate the rise of a genuine liberal leadership. The latter is a scary proposition and may result in several lost decades. The former is a painful compromise.

Why does he want to wield power if that power is not for any good? Merely for the sake of having power? Power should be instrumental for good purposes; elevating power to an end in itself is calamitous.

What’s the alternative you have in mind ? Surely not “Swarna Bharat Party” ? Let’s see if they fight elections and how many votes they get. I say there should be some limit to childishness & immaturity in fully grown-up, intelligent men and women !

The current political climate in India is such that, sooner or later, someone is going to ask Atanu “so how much did Khangress pay you to write this piece?” (including the “so”). So, before some IT cell scums do it, let me go ahead and beat them to the game. But it does serve to show you how hopeless the situation is.

Outsourcing the government to foreigners is not new to India. A hand full of people of Italian/Iranian descent may get the contract for the next five years to manage India. A multinational company (MNC) could do as well. Being ruled by a company (East India) is recent history.